Ukraine acts to form new team, plans unilateral ceasefire

KIEV (Reuters) - Ukrainian President Petro Poroshenko put a pro-Western and business-friendly stamp on his leadership on Wednesday and made peace proposals for the rebellious east involving a unilateral ceasefire by government forces.

Poroshenko, installed as president 11 days ago, nominated Pavlo Klimkin, a pro-European diplomat now serving as ambassador to Germany, for foreign minister. He also asked parliament to approve Valeria Hontareva, an experienced banker widely respected in business circles, as new central bank chief.

Both nominations, which require parliament's approval, confirmed Poroshenko's determination to shift the ex-Soviet republic towards the European Union and attract foreign investment for the cash-starved economy. He may present his nominees to parliament on Thursday.

"We are seeing Poroshenko appoint very credible, pro-western, market and business-friendly people," said Timothy Ash of Standard Bank in a commentary.

Klimkin is a 47-year-old Moscow-educated physicist who entered the foreign service more than 20 years ago, becoming Ukraine's envoy to Germany in 2012. Seen as ardently committed to European integration, he played a key role in negotiating the association and free trade agreements with the EU, which toppled president Viktor Yanukovich spurned, finally provoking the uprising that brought him down. Hontareva has worked for leading Ukrainian and international financial institutions in Ukraine for 18 years. She held the post of first deputy chairman of the board and financial markets chief at ING Bank Ukraine from January 2001 to December 2007. Prior to that she served as a member of the board of Societe General Ukraine, where she was responsible for capital market operations. If approved as head of the central bank, she will figure prominently in future negotiations with the International Monetary Fund which last May signed off on a $17 billion bailout for Ukraine with tough conditions including steep hikes in gas tariffs and floating the national hryvnia currency. Poroshenko also nominated Vitaly Yarema, currently first deputy prime minister, to be prosecutor general. In that key law-enforcement post, he will be expected to play a role in reforming the country's corruption-ridden judiciary

TENSIONS, VIOLENCE CONTINUE

Earlier, after a late-night telephone call with Russian President Vladimir Putin, Poroshenko outlined a 14-step plan, including an amnesty for separatist fighters in eastern Ukraine who lay down their arms. He also outlined tighter controls over Ukraine's border with Russia.

"The plan will start with my order for a unilateral ceasefire," Poroshenko said after speaking to students at a military institute in Kiev. "Immediately after this, we need very quickly to get support for the peace plan ... from all participants."

Acting Defence Minister Mykhailo Koval told journalists in Kiev the ceasefire "will happen in the next few days".

Fighting continued overnight, however.

A spokesman for government forces, Vladyslav Seleznyov, said more than 30 separatist fighters had been "killed and wounded" in fierce exchanges of fire near the small town of Schastye on the edge of Luhansk. Three soldiers had been killed on the government side and 9 wounded, he said.

The figures for separatist casualties could not be independently confirmed. But a Reuters journalist in rebel-controlled Luhansk saw separatists loading empty pine coffins onto a lorry that then joined a convoy heading to Schastye.

Others swapped their battle fatigues for white coats or taped Red Cross signs to their backs and arms and then went in search of bodies of rebels killed in the last few days.

Mikhail, a rebel fighter who was handing out face masks as protection against the smell of human decay in Schastye, said: "There's supposed to be a ceasefire, but no-one there trusts them (the government) to keep it ... We'll be on the alert."

The violence in the east has cost the lives of 147 Ukrainian soldiers and wounded 267 up to now, the defence ministry said on Wednesday. This figure did not include other law enforcement bodies such as the national guard.

Ukraine accuses Russia of backing rebels in the industrial Russian-speaking east who rose up after mass protests in Kiev toppled Yanukovich, who was sympathetic to Moscow. Kiev says the rebels have been bringing in weapons over the long border with Russia.

On Wednesday, the Ukrainian government said an explosion on a section of pipeline carrying Russian gas through Ukraine to Europe had been caused by a bomb and that it saw "foreign interference" behind the attack. Prime Minister Arseny Yatseniuk ordered security reinforced at gas pipeline installations to avoid further acts of sabotage. [ID:nnL5N0OZ1ON]

Russian investigators accused Ukrainian Interior Minister Arsen Avakov and Ihor Kolomoisky, governor of the Dnipropetrovsk region in the east, of criminal acts in the government's military push against the separatists.

A spokesman for the federal Investigative Committee said they were under investigation on charges including murder, kidnapping and using illegal methods of warfare - although it was not immediately clear under what jurisdiction.

(Additional reporting by Alessandra Prentice in Luhansk; Writing By Alissa de Carbonnel in Moscow and Richard Balmforth in Kiev; editing by Jeremy Gaunt)